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Presentation

Goosehead Insurance, Inc beats earnings expectations. Reported EPS is $0.37, expectations were $0.2.

Operator: Good day, and thank you for standing by. Welcome to the Goosehead Insurance First Quarter 2026 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Maddie Middleton, Senior Director of Investor Relations.

Maddie Middleton: Thank you, and good afternoon. Before we begin our formal remarks, I need to remind everyone that part of our discussion today may include forward-looking statements, which are based on expectations, estimates and projections of management as of today. Forward-looking statements and our discussions are subject to various assumptions, risks and uncertainties that are difficult to predict and which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed on them. We refer all of you to our recent SEC filings for a more detailed discussion of risks and uncertainties that could impact future operating results and financial condition of used.

We disclaim any intention or obligation to update or revise any forward-looking statements, except to the extent required by applicable law. I would also like to point out that during this call, we will discuss certain financial measures that are not prepared in accordance with GAAP. Management uses these non-GAAP financial measures when planning, monitoring and evaluating our performance. We consider these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons period-to-period by including potential differences caused by variations in capital structure, tax position, depreciation, amortization and certain other items that we believe are not representative of our core business.

For more information regarding the use of non-GAAP financial measures, including reconciliations of these measures to the most recent comparable GAAP financial measures, we refer you to today’s earnings release. In addition, this call is being webcast, and an archived version will be made available shortly after the call in on the Investor Relations portion of the company’s website at goosehead.com. Now I’d like to turn the call over to our CEO, Mark Miller.

Mark Miller: Thanks, Maddie, and good afternoon, everyone. Thank you for joining us today for our first quarter 2026 earnings call. I’d like to begin by welcoming John Martin as our new Chief Financial Officer. Succeeding Mark Jones, Jr., who has been promoted to President and COO. John brings a strong combination of financial expertise, operational discipline and a background rooted in technology and e-commerce, which aligns well with our focus on execution and our high-performance culture. The team is excited to welcome, John, and I know he looks forward to engaging with our investors and analysts in the quarters ahead. We are equally thrilled to see Mark expanded leadership responsibilities. John will report to Mark and I will work closely with both of them continuing my role as CEO.

These leadership announcements are evidence of our commitment to a comprehensive succession plan and our focus on ensuring Goosehead is the right leaders for today and well into the future. Let me start by reinforcing something we’ve said consistently. Goosehead is a compounding business designed to drive long-term growth in policies in force, revenue earnings and ultimately, cash flow. We achieved that by operating a highly scalable distribution platform, supported by world-class service. For the first quarter, we delivered strong and consistent financial results, with revenue growing 23% to $93 million, core revenue growing 15% to $79 million and delivering adjusted EBITDA of $24.4 million. Last quarter, we spent a significant amount of time discussing investments we’re making in our digital agent platform and AI initiatives.

We’ve been very intentional in prioritizing long-term value creation while managing to strong and sustainable margins in order to maximize shareholder returns. Today, I want to focus on the strong start to the year and how the investments we have been making are beginning to translate into tangible business results. Goosehead has always been a technology forward distribution platform, but over the past several years, technology has become even more deeply embedded in every part of how we operate. What’s in front of us today is what I believe is the single largest opportunity, our business and the broader personal lines industry has ever seen. In nearly every industry, customers have the ability to choose how they want to interact and transact.

That has not existed in the independent personal lines insurance space until now. Choice has always been part of Goosehead’s DNA. Historically, that choice has been centered around access to a broad set of carrier partners. We’ve proven that we are a market leader in providing clients coast to coast with access to over 200 underwriting partners. But today, we’re expanding that definition of choice. We’re now giving clients a choice in how they prefer to actually transact. For the first time in the United States, clients can shop, quote and bind insurance through a true choice model whether that is fully digital, partially digital or entirely human-driven. During our last earnings call, we announced we went live with this capability with multiple auto carriers in Texas, including partners like Progressive, Liberty Mutual, Mercury and Root.

Today, we’re excited to announce that clients can now digitally bind multiple homeowners products in Texas with carriers such as SageSure and Mercury. This is an important milestone in building a large-scale digital marketplace, which is now that much more achievable because of the real demand that now exists with our carrier partners. Carriers want this capability and they want it specifically with goosed. Because of the trusted relationships we’ve built over decades for access to large amounts of integrated data that drive better underwriting outcomes and our differentiated go-to-market strategy executed through highly curated client acquisition channels. At the same time, the broader insurance shopping experience, particularly online remains fragmented and often broken, you may see advertising across social media for AI insurance agencies that claim they combined and service autonomously or headlines that declare instant best rates.

Most false claims end up generating terrible experiences for the end user. Customers are frequently routed through lead aggregators and data resellers, creating the illusion of choice, but ultimately leading to confusion lack of transparency and in many cases, poor coverage decisions. Goosehead’s digital agent platform is solving these pain points. We’re delivering real choice, not just in product offering, but now in purchasing experience. And by implementing this platform with a targeted audience through our partnerships, we remain the trusted adviser, our clients and carrier partners rely on. In the area of AI, we are now seeing tangible benefits as we roll out multiple use cases across our service organization. Lilly, our AI-powered virtual phone assistant is now fully resolving approximately 19% of all inbound calls without requiring transfer to a live agent.

This improves speed to resolution for our clients and allows our service teams to focus on more complex and consultive interactions. In addition, we have deployed tools behind the scenes in areas such as intelligent case routing, which has allowed us to reinvest roughly 40 full-time service team members towards more complex and value-added interactions. These tools are driving real-time efficiency gains while also adding scalability to what has historically been the most complex and labor-intensive part of our business. All of this progress is occurring alongside a rapidly improving product market. Our carrier partners are increasingly leaning into growth across both home and auto products nationwide. As pricing stabilizes and product availability expands, we are seeing consistent improvement in many of our key operating metrics.

For example, our client retention continues to climb at a steady pace and we expect to achieve 86% client retention during the year. Find rates and packet rates are increasing, supporting higher agent productivity. Given these strong market conditions, we believe the time is right to more aggressively expand our offensive capability with more agents and more geographies. When we spoke to you in February, I commented that we had fundamentally reset the corporate agent footprint. At that time, we expanded to new geographies like Tempe, Arizona and Nashville, Tennessee. We’re continuing to make excellent progress on this initiative. During the quarter, we opened three additional corporate offices in Seattle, the Washington, D.C. area in Minneapolis, and we had the fourth opening in April in Indianapolis.

As of the end of the first quarter, we now have more than half of our corporate agents outside of Texas. These three offices are outperforming our expectations. But even more importantly, these offices serve a strategic purpose that far exceeds the short-term production they generate. They are quickly diversifying our agent base, making Goosehead an even more attractive partner for our major national carriers and these offices are talent incubators for future franchise ownership. Since the beginning of the year, we have launched 12 new franchises out of our corporate offices, all of which are outperforming the average franchises we have launched from outside of our ecosystem. And just their second month live, these 12 launches contributed new business production that were nearly 2.5x the average franchise.

Our existing franchise base also continues to lean into growth with 133 franchises hiring at least 1 producer during the quarter, generating nearly 50% increase in gross producer adds year-over-year. As agencies continue to focus on hiring and driving productivity, they’re reaching new highs with 208 franchises hitting monthly production records during the quarter. On top of that momentum, our enterprise sales and partnership teams are rapidly gaining scale. What was a start-up inside the organization just 2 years ago, is now meaningfully contributing to total revenue. When we step back, we’re building more than an insurance agency. We’re building a technology-enabled distribution platform that delivers real choice, frictionless experience and better outcomes for clients and carrier partners.

I want to thank and recognize our teammates. This quarter’s performance is a direct result of their discipline, execution and commitment to delivering a world-class client experience. With that, I’ll turn it over to Mark Jones Jr., our President and COO.

Mark Jones Jr.: Thanks, Mark, and good afternoon to everyone joining us. I want to echo Mark Sentiment in welcoming John as our new CFO, and I look forward to working closely with him in the future. What an exciting time it is here, like you said. We’ve now built the country’s first choice online shopping platform in the history of the Personal Lines insurance with our Digital Agent 2.0. As we enter into a new world for insurance distribution, it’s important that we take a step back and fully understand what that means for clients, carrier partners, strategic partners and agents alike. As Mark Miller discussed, for clients, we now have choice. Not only in what underwriter you have access to, but how you engage and transact. Why did this never exist before because there’s never been a personalized agency like you said.

Selling and servicing multiple product lines across 50 states with over 200 carriers is a challenge no other company has been bold enough to tackle. A frictionless choice shopping model has many hurdles in development that can’t easily be sold by throwing money at the problem. It takes deep domain expertise across regulators, product knowledge, client behavior and the inner workings of fragmented technology solutions across the industry. Each regulator has different requirements. Each carrier has bespoke underwriting criteria and a different technology stack with degrees of sophistication, and each client segment has unique needs and preferences. How are we able to solve this? We’ve been very intentional about our location in the value chain in distribution.

We built a strong and lasting relationships with our carrier partners to make sure our goals are aligned, and we can deliver a differentiated experience to them. We’ve been thoughtful about geographic expansion. So we understand the specific nuance of each critical state. We’ve spent 20 years and hundreds of millions of dollars in our company’s history investing in technology to drive the industry forward. And we have always placed the client at the center of our universe. So we have a clear understanding of what matters, not just at the initial sale but that client’s entire life cycle. I’m incredibly proud of our team for what we have delivered so far, but we are just getting started. In the coming quarters, we plan to continue to expand our offering with new carrier partners roll out to additional states and add features and functionality that improve the client experience and conversion rates to maximize the economic returns.

As exciting as the rollout of our Digital Agent 2.0 is I’m equally excited about the direction of our corporate, franchise and enterprise teams. As Mark Miller mentioned, we launched three new corporate offices in the quarter, including Seattle, the D.C. area in Minneapolis, all of which are hitting the ground running. As we’ve discussed, we’re highly intentional with where we grow our presence for the benefit of our teammates, our clients and our carrier partners. Productivity in our corporate channel continues to improve, supported by increased lead flow and better conversion from a combination of the improving product market, expansion into untapped geographies and investments in our management infrastructure. The enterprise sales team, which is fueled by our partnership efforts, continued its rapid growth in the first quarter, generating new business growth of over 70% and contributing approximately 20% of the production of new business commissions and agency fees.

The partnerships that feed that team now include 2.3 million potential clients across mortgage origination and servicing as well as 4 million potential clients from other home and financial services organizations. While there may be some overlap across our partner client base, that improves our likelihood of conversion as we increase the number of touch points we have with potential clients. The momentum we’re seeing across our corporate and enterprise sales teams generated in new business commissions growth rate of 29%, the fastest pace of growth we’ve seen in nearly 5 years. The franchise business also saw a strong acceleration in the first quarter. Growing new business royalties by 14%. Our agency staffing program, which we call ASP continues to be a highly strategic asset, aiding our franchises in faster growth and expansion.

Sourcing from the AFP program grew 53% over the prior year quarter. Our average producers per franchise expanded to 2.3 from 1.9 a year ago. Total franchise producers at quarter end were 2,150, up 3% year-over-year. Turning to our financial results for the quarter. Total revenues for the quarter were $93.1 million, up 23% over the previous year quarter, with core revenues growing 15% to $79.5 million. As we look towards the second quarter, we expect a similar growth rate in core revenues when adjusting for the $4 million of previously unpaid renewal commissions and royalty fees that we recovered from a carrier partner in the second quarter of 2025. Throughout the second half of 2026, we expect improvements in client retention from our strategic initiatives and the improving product market to begin to outpace the impact of slower year-over-year pricing in our book of business.

We expect that to result in faster core revenue growth when combined with continued strong new business generation. Ancillary revenues, which is largely comprised of contingent commissions, was $11.9 million for the quarter, growing 141% year-over-year. Our outlook for contingent commissions on the year remains unchanged at 60 to 85 basis points of total written premiums. We will provide more updates as underwriting performance advances throughout the year. Cost recovery revenue for the quarter was $1.7 million. During the quarter, we launched 20 new franchise locations across 10 different states. We also had 10 agencies exit the system and 63 agencies consolidate into another larger franchise. Total written premiums for the quarter were $1.1 billion, growing 13% over the previous year quarter.

Policies in force grew 14% for the quarter to $2 million. We expect the growth rate in policies in force to accelerate during the year as client retention continues to improve and we drove strong growth in new business production. Adjusted EBITDA for the quarter was $24.4 million, growing 57% and delivering an adjusted EBITDA margin of 26%. During the quarter, we demonstrated strong cash generation with $22.9 million of cash flow from operations, utilizing our excess cash, combined with [ drying ] $26 million on our existing revolving credit facility. We repurchased and retired 985,000 of our Class A shares, representing $49.8 million. We believe there is a significant market dislocation in our stock price and retiree and [indiscernible] shares will generate excess shareholder return.

As of the end of the quarter, we now have fewer shares outstanding than we did at the time of our IPO. We plan to continue to be opportunistic with our remaining $148 million on our existing share repurchase authorization. We ended the quarter with $26 million of cash and cash equivalents and had total debt outstanding of $324 million. We remain committed to conservative balance sheet management and do not expect to add leverage outside of our historical precedent of 3x to 4x trailing 12-month adjusted EBITDA. We are reiterating our guidance for the full year 2026. Total revenues are expected to grow organically between 10% and 19%. Total written premiums are expected to grow organically between 12% and 20%. I’m incredibly excited about the position of our business in.

Our business is healthy and delivering strong growth. And because we have been prudent stewards of our capital, we’re able to invest in new and exciting technology that we believe will change the industry to our advantage. Thank you to our teammates, partners, franchises and shareholders for your continued trust. We are just getting started. With that, let’s open up the line for questions. Operator?

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Operator: [Operator Instructions]. And our first question comes from Andrew Andersen with Jefferies.

Andrew Andersen: How should we think about the 2026 PIF acceleration? Do you view this as more renewal retention driven or new business driven? And could you also help us think about seasonality in Q2 and Q3?

Mark Miller: Andrew, thanks for the question. So if you think about how big our book is, pretty clearly, retention is what’s going to aid in PIF acceleration more than what new business will just given so much of the book is in the renewal base. We expect to see continued improvements in client retention. We mentioned in the prepared remarks that we expected to get to at least during this year. But having said that, we’re seeing really strong new business momentum, which is super fun to watch, see the new business commissions line growing 29% in the first quarter. That’s the fastest growth rate in the last 5 years. So it’s a combination of both things, but the renewal side has a bigger impact on Pet. From a seasonality perspective, generation of new business will likely kind of follow the normal seasonality trend, which would mean the second and the third quarter typically contribute more than the first and the fourth quarter.

I’m not expecting that trend to change. And in the past, you’ve addressed why AI is in a disintermediation risk at policy inception. But how do you ensure that kind of increased digital convenience doesn’t create a greater disintermediation risk at renewal over time? Yes. I think actually, the hurdles in the renewal side are even bigger than they are in new business generation. And that’s not to downplay how challenging the new business generation aspect of this is. There’s so much in terms of competitive moat that goes into our ability to actually put policies in for us. But there is a lot of manual labor that can’t easily be automated on the back end to make sure policies continue to retain that clients get all of their service needs met.

I don’t think people fully understand how much work goes into that. It would not be very easy to automate a lot of what we do. We’ve been able to take big chunks of work and automate it, but that’s going to be a really long tail of stuff. And as you guys know, all of the economics in this business are in the renewals. So if you’re trying to automate as much as you can, but you leave off some portion of it, you’re not going to be able to actually generate profitability over the longer term.

Operator: Our next question comes from Brian Meredith with UBS.

Brian Meredith: A couple of quick questions here. First, just quickly on the digital agent, is the economics there the same as your other business from the perspective of commission rates that you’re receiving from the carriers?

Mark Miller: Yes. So it’s a really interesting development, Brian. Because our go-to-market strategy with the digital agent is largely to integrate it into partners where we have good information about who the clients are and we can make sure that we’re providing carriers with really high-quality business. there has been increased demand to have outsized compensation in that partner and digital agent channel. So I mean that wasn’t really something that we contemplated when we started this process, but it’s been a positive development that carriers have indicated they may be willing to pay more for policies distributed that way.

Brian Meredith: Interesting. And then what’s the, call it, pipeline of potential new carriers on the platform, particularly for the auto insurance side?

Mark Jones Jr.: Yes, Brian, this is Mark. We have four auto carriers now already on the platform, which gives us really good coverage. As you know, like auto is not specific to region necessarily like homes as much. So we have pretty good coverage and a couple more to be added TBD in the next 2 months. But it has been interesting to watch like initially, there was a lot of hurdles for us to jump over to explain how this product will work, how we’re able to safeguard underwriters and clients for making poor decisions through digital distribution. And as we’ve had more and more conversations and explained why it will work so well with us. The demand from new carriers wanting to get in line to get on the platform has been really fun to watch as well.

I mean there’s people now saying, how do we get involved because we feel like we missed the first wave. We’re really looking, Brian, kind of where to our partners that we’re working with, where do they have client needs. And we’ve been really focused on rolling it out in Texas and working on our conversion. So it’s kind of a new muscle for us is how do you do digital conversion once you get them into the funnel, how do you get them to actually buy. And so we’re really focused on Texas, and we’ll roll out to the next biggest state and the carriers that we need to fill those states out.

Brian Meredith: That’s great. And then one just quick numbers. Commission rates that you’re seeing across your book, are we starting to see a lift?

Mark Miller: Yes. The aggregate commission rate is now up year-over-year. which is great to see. I mean, the communication of the carriers has all been around how do we incentivize more growth. And it’s — if you want to incentivize more growth compensation is a tool that you can use pockets of the country where there was maybe higher E&S usage in previous years. You can see that in the renewal commission rates, but I don’t expect that to be a long-term thing. I am happy to see the aggregate commission right now going up.

Operator: Our next question comes from Tommy McJoynt with KBW.

Thomas Mcjoynt-Griffith: A couple of questions around your digital agent. First off, is that experience really entirely targeted through your enterprise partnerships? Or are you also advertising the digital agent as a full comparison and appearing in top-of-funnel search results.

Mark Miller: Yes. We’re not really trying to drive eyeballs to goosehead.com. What we want to do is put it in a place where it’s going to drive the maximum value for everybody across the value chain, which we believe is through the partner channel. I think there’s going to be stumble upon business. We’ve had stumble upon business that people buying auto and home insurance now directly through the website. But we’ve been really clear with our carrier partners about what the go-to-market strategy is just so we can make sure everybody is having a good experience. And so it’s largely going to be with partners. Over time, that may evolve as the brand gets a little bit bigger, but we’re not necessarily going to deploy a bunch of capital to try and draw eyeballs. It’s not going to be an efficient use of money.

Thomas Mcjoynt-Griffith: Okay. Got it. And then my other question on digital agent. How do you balance the responsibility to the customer that’s searching for insurance to the extent that they are using digital agent, and there’s only a couple of carriers that may be available for homeowners quotes versus if they were to use a human Goosehead agent, they might be able to see a lot more perhaps quotes with perhaps better coverage or better pricing. How do you balance that responsibility to the customer?

Mark Miller: Yes. So what we’ve tried to do is make sure areas we’re bringing to the platform initially are the ones that do a disproportionate amount of the business in the geographies that we roll it out in. So we’ve got really strong coverage in our — both our home and auto carriers that are on the platform now. So it’s not like you’re getting a random one-off carrier that shouldn’t necessarily be writing a ton of business in your area. But we also are able to build into the platform, safeguards and kick outs, basically would say, you may be eligible for XYZ carrier, but that’s not probably the right spot for you to be. You should talk to an agent. And that helps us prevent carriers from getting business that they shouldn’t get and from clients choosing options that they probably shouldn’t choose

Thomas Mcjoynt-Griffith: Got it. And actually, just last one, if I could sneak it in. On the new business commissions, you said 20% of the new business is coming through. Was that the partnership channel? Or was that through digital agent. Can you clarify what that number was?

Mark Miller: So that’s coming from the enterprise sales team, which is largely the partnership channel. The digital agent is not today generating significant revenue and nor did we expect it to be generating significant revenue yet. We expect that those contributions to start to begin really in the second half of the year as it gets more deeply integrated into our partnership base. But the enterprise sales team, which is the human fulfillment of our partner engine, which has only really existed now for about 2.5 years, is growing really, really nicely and making real meaningful contributions to the revenue growth rates.

Operator: Our next question comes from Charlie Letter with BMO Capital Markets.

Unknown Analyst: Maybe just on the new corporate state entries, and that you called out in the progress with Nashville and Arizona. Can you update us how much of your premium was in Texas this quarter and how you expect the evolving state mix to impact premium per policy, I guess, as we move throughout the year?

Mark Miller: Yes. So for the first quarter, 37% of the premium was in Texas, which is down from 39% as of the end of the fourth quarter. So continuing to diversify the book, which is a really good thing. Each individual state has different kind of puts and takes on the economics of their own policies. So where you see usually lower premium per policy. Typically, you get better bind rates and better package rates. So it all kind of come out — comes out in the wash in terms of productivity. We were really strategic in the locations that we pick. It’s areas that have good demand from our carrier partners. I mean they want us to go sell new business there. They’ve got growing metropolitan areas. It’s a good place to recruit from. It’s the right kind of cost of living. So I’m really happy with where we’ve planted flags so far, and the — those offices are off to really phenomenal starts.

Unknown Analyst: And then maybe just one on the guidance. So the contingent commission number was really strong this quarter, but you didn’t bring up the lower end of your guidance for total revenue. Can you just kind of walk us through your thinking? And I guess, what would — how you’re thinking about the cadence of revenue as we go through the year.

Mark Miller: Yes. It was a strong contingency quarter like we’ve kind of talked about in the past, the first quarter always includes some kind of true-ups from the fourth quarter where we didn’t have enough information to actually record revenue or there was too much uncertainty on where he would actually earn the commission. So we had an outsized number in the first quarter relative to history. That doesn’t necessarily change our outlook on what contingency should be for the full year. So it didn’t feel like there was a good rationale to try and update the guidance number, given we still don’t know if there’s going to be a hail or hurricanes or fires, right? So we’ll continue to keep an eye on that throughout the year.

Unknown Analyst: Just as a follow-up, nothing has changed on your view on core revenue and the cadence there, correct? SP1 Correct. Yes, correct. We’re still expecting acceleration in the second half of the year as the improvements in client retention begin to outpace the kind of offset of the pricing impacts on year-over-year premium changes as well as contribution from strong new business production across all 3 sales channels really driven by agent productivity and adding a few more hands here and there.

Operator: Our next question comes from Andrew Kligerman with TD Cowen.

Andrew Kligerman: So I’m kind of curious on the franchise producers. Looks like you were up quite a bit year-over-year on less than a year of franchise producers, but those that have been with the company for more than a year, declined to $1,525 from 15 77%. Could you give a little color on why the — the more experienced producers came off?

Mark Miller: Yes, Andrew, that’s really the consolidation that’s been going on in the franchise community, which, as we’ve talked about in the past, is really a good thing and done very intentionally. In the business just to create more larger, more successful franchises. We continue to see that as super healthy. And so that’s largely going to be taken out of people that have been in the system for multiple years. But what I’d like to see is that the agencies continue to reinvest that capital and hire more. So we had really strong gross adds in the first quarter. I was really pleased with that, and we’re seeing good productivity of those producers. So it feels like the franchise community to me right now is probably healthier than it’s been in many, many years.

Andrew Kligerman: And the producer per franchise office, is that number up materially year-over-year?

Mark Miller: Yes. I think it’s up something like 13% year-over-year, 18% year-over-year. So it’s up to 2.2% versus last year this time, it was $1.9 million. it’s moving exactly like we wanted to. I still believe we can get to about 5 producers per franchise in a reasonable time frame. And that’s kind of where you start to get a real scale business that is — operates a lot more efficiently than a sole proprietorship.

Andrew Kligerman: Got it, Mark. And then the other part of the same aligned question, for those producers at the firms more than a year, the productivity, franchise productivity was up remarkably from — from 37 — 30.6 to 37.4%. So wondering if you could provide a little color on that sharp productivity increase.

Mark Miller: Yes. So I think that productivity number is on the per franchise right? So it’s not at the producer level, that’s the per franchise number. And so as more canine agencies keep hiring, that’s going to help drive total productivity per location. But the individual producers underneath them are also getting more productive. That’s a function of those producers ending up in franchises that are more in the top half of the community. The ones that have scaled infrastructure, they’ve got good management practices, they demand high levels of productivity themselves. And so we’re continuing to try and push agencies to join that club, right, invest in your business, invest in your management infrastructure and hold people accountable, and that message is being well received.

Andrew Kligerman: Got it. And just one last one. The mortgage originators, the other home and Financial Services operations where you’re embedding our enterprise product. It sounds really awesome. What is the most that keeps Goosehead with these mortgage originators and others and keeps out the competition. What’s the moat there?

Mark Miller: Yes. I think there’s a lot of things that generate a pretty significant mode. I mean you can tick through the whole list, but we’ve got the national scale and local expertise of our agent force. So we’ve got more than 2,500 agents across the entire country, which means we know how to handle your house in Miami, your house and L.A. on stilts the one in the flats in Nebraska. We can handle everything that happens in your portfolio, we’ve got the ability to route leads appropriately, so you’re getting to the best agent at the best time. We have the service function on the back end, which I believe is really differentiated in the industry. that can deliver strong levels of retention, which is where all of the actual profitability in this business is.

We have a better product offering than what we believe most other organizations have with over 200 different underwriters and the technology to bind in the human world, is we think much better than what other people have. But now we’ve also got the ability to bind fully digitally that. Again, I can’t overstate this enough, nobody else to our knowledge has that ability to find product in one location and a choice shopping model. That is a huge competitive moat.

Operator: Our next question comes from Luke Nelson with Cantor Fitzgerald.

Unknown Analyst: I’m just wondering, going back to retention, you mentioned you’re expecting to get closer to 86% for 2026 plus I’m just wondering kind of can you get into a little — some granularity around why is it taking kind of longer retention to improve than anticipated?

Mark Miller: I wouldn’t say it’s taking longer than anticipated. I mean if you go back to some of the remarks we’ve made before, we never promised any individual quarter that it was going to tick up then. But if you remember, we were at 84% for 5 straight quarters. We’ve now been at $85 for I’m anticipating us to click up to 86% during this year. I’m really pleased with the direction of the client retention number. It is continuing to grind upward. We’ve got some specific initiatives ironed out to try and accelerate the pace of that client retention improvements. And obviously, the product market being in a really healthy spot now is super helpful for that.

Unknown Analyst: Got you. And then I guess just from your understanding, do you think maybe the reason is not as high as it once was, is maybe the agents are more focused on the new business, but the service aspect doesn’t have — I guess, maybe the training to deal with the big increases on the existing business? Or just can you kind of give more detail there, at least on the programs you’re trying to initiate?

Mark Miller: No. Our agents have always — it’s always been their job to go capture new business, still deliver an excellent service when they’re talking to clients, but their main focus should be capturing new business. And our service functions main focus should be retaining the existing business and really delivering an outstanding service. And we have made a ton of structural and foundational improvements into our service function in the last couple of years. We feel like we’re delivering an excellent value proposition to our clients. I think what’s happening here is people are just kind of frustrated that pricing got so expensive over the last several years, and that’s I don’t know if that just means consumer behavior has fundamentally changed, and they feel like they need to shop it more frequently.

If they do, I still think that actually benefits us because they’re going to be shopping in an area where we can provide the most amount of actions with the best service. And so if you’re coming from a different agency, we should be able to provide a differentiated value to you.

Unknown Analyst: Okay. That makes sense. And then just my last question. I’ve just been looking sequentially at your Net Promoter Score just been declining since, I think, late 2024. Can you just kind of dig into what’s going on there? And if you have any further details?

Mark Jones Jr.: Yes, this is Mark. Other, Mark. I think we’ve said it before, the NPS score is kind of an industry sentiment sort of a score, the way we use it. steep price increases over the last 3 years, particularly in our biggest market in Texas have been pretty steep, like? So — and FPS is a 12-month rolling average sort of number. And we’ve talked about we expect it to come down over time. And that’s what we — it’s behaving kind of like we expected it to be. We — I think we delivered an outstanding client experience. And it’s kind of dislocated from retention rates at this point. Mark just talked about retention rates every month continue to climb up. So they’re kind of dislocated, and we do client surveys. The client survey scores are extremely strong. So we think we’re delivering a really good client experience.

Operator: Our next question comes from Maxwell [ Fritzer ] with Truist.

Unknown Analyst: Calling in for Mark Hughes. Your premium retention has been fairly steady here lately as you’ve mentioned, but doing a little math, the corporate retention has gotten substantially better over these last few quarters while franchise retention has dropped off just a bit. What is your experience in these channels that you think may be driving the difference here?

Mark Miller: Yes. One thing I would point to is just kind of the geographic diversity of the franchise book versus the corporate book. So the franchise book has more exposure to places like Florida and California, where there was more commission rate pressure over the last several years. And so as you write more new business into the access and surplus lines or even the state-run plans, as those become a larger portion of the bucket just can drag down your revenue retention rates. I’m not anticipating that continuing to be an issue. I’m expecting client retention to outpace that in the second half of the year versus the corporate team is much more in places like Texas, Chicago, Illinois, places like that where there is much more admitted product versus the excess and surplus lines.

Unknown Analyst: Great. And then I think this was in the prepared remarks, but how many franchise locations were onboarded in the quarter?

Mark Miller: 20. 20 new agencies, 12 of which were launches from the corporate team and those are performing at about 2.5x the average external launch. So that strategy continues to be a really important one and one that is pretty strategically hard to replicate.

Operator: Our nexT question comes from Pablo Singzon with JPMorgan.

Pablo Singzon: I wanted to ask about the growth in enterprise sales. I was wondering, I think you had got 70% growth year-over-year. How much of that was head count versus productivity? And I guess, how are you thinking about the channel as it scales up, right, because it generates a lot of flow. I presume there’s some expected throughput for an enterprise agent, right? And depending on the flow you get, you’ll match that with manpower. But if you sort of put everything together, like I guess like long-term growth and productivity or throughput versus regular corporate or regular franchise agents?

Mark Miller: Yes. So enterprise right now, the growth is coming from a, we’ve got nice, stable, strong productivity, and we’re adding more heads into the system. So we’ve built out a strong partner base, and we have what is a pretty honestly awesome pipeline of potential new partners. And so we can meter the lead flow just to make sure we don’t get over our skis and can’t deliver on the service we are supposed to deliver on. But we’re adding heads now to the point where we feel like we can continue to execute on 100% of the lead flow. We just want to load balance that appropriately. And the tenure on that team is obviously still pretty low because it’s only existed for a couple of years. But you’re seeing at the top end of the tenure curve, the people who have been with us for a while now perform equal, if not better, than the average corporate franchise agent.

But over time, it’s still a three-pronged approach, right? We want the enterprise team to be there to operate at speed and deliver for our partners. We want the corporate team to be there to be the talent incubator for the entire organization to demonstrate best practice to show kind of high how productivity can be and generate good profitability. And then the franchise team is kind of the growth engine that can get to every place in the country without this massive infrastructure that’s required to run the corporate team.

Operator: Our next question comes from Roland Mayer with RBC Capital Markets.

Unknown Analyst: I wanted to just ask on the — last quarter, you talked about EBITDA margins being flat to down a little this year. And I was wondering if this quarter changes that expectation.

Mark Miller: Yes. So if you look ex contingencies, I would say the expense base was slightly lower than what we were initially planning for in the first quarter, which is really just a function of timing of hires. So if you’re looking at the compensation expense in Q1, I think it only grew 5%. And I wouldn’t expect that trend to continue throughout the rest of the year as we onboard more talent to deliver digital agent integration into partners, kind of marketing conversion type things as well as additional sales head count and then some more service head count just to handle the additional workload that comes throughout the year as we continue to sell new policies. On the G&A side, big G&A first quarter because we had our conference with our franchise community, our top end of our franchise community in the first quarter of this year.

which was in the second quarter of last year. So that was approximately about $1.5 million of expense in Q1 that was not in Q1 last year. So if you round all that out, timing of compensation was a little bit delayed relative to Q1 initial expectations. So you should think of that as maybe high teens, low 20% growth rates throughout the remainder of the year. And G&A was higher in Q1 than it will likely be throughout the rest of the year, but it doesn’t necessarily change our margin outlook for the full year because we still have some digital agent investments to make, we want to be leaning into growth right now.

Operator: Our next question comes from Katie Sakys with Autonomous Research.

Katie Sakys: I just wanted to circle back on some of the questions about our revenue growth. I think you previously framed first half as coming in closer to low double digits when we heard from you in February. Clearly, 1Q outperformed that. Do you expect 2Q to also sort of trend higher than those initial low double-digit expectations before it further accelerates into the back half of the year?

Mark Miller: Yes. So Katy, I would just make sure you’re tracking the $4 million from the second quarter of last year. That’s a year-over-year comparison challenge. And we talked about low double-digit first half, not necessarily in each individual quarter. And in our prepared remarks, we said core revenue growth rate when you adjust for that $4 million comparison challenge will look similar to the first quarter number. And then from that point, you should be expecting to see kind of the renewal book begin to improve its performance, it’s going to drive faster core revenue growth rates.

Katie Sakys: Makes sense. And then I think you guys had previously a couple of quarters ago suggested that on an annual basis, you expect about 10% of your corporate agents to launch their own franchises. Is that still the right launch rate to be thinking about?

Mark Miller: Yes. So that’s certainly the right launch rate to be thinking about over time. And if you look at the last 12 months, we’ve launched 30 corporate agents into franchises, which is kind of ballpark-ish, 10%. And then kind of a new development, which is a close adjacency is for some of our embedded partner franchises as well as our kind of larger-scale agencies. We’ve actually seeded them with a few corporate agents to help supercharge their growth. And that’s really just when it is a good fit for that corporate agent. Maybe they want to move to that geography where that franchise is and it’s a good fit for the partner or the other franchise. So if you include those, we’ve now launched in the last 12 months, 30 corporate agents into their own franchise and placed 10 into existing agencies or partners.

Which is completely aligned with the strategy we want to do, right? We want the corporate team to be the talent incubator. It’s where we grow the best of the best. So that’s a great way to supercharge growth on the franchise side of the business.

Operator: [Operator Instructions]. And I’m not showing any further questions at this time. I would now like to turn the call back over to Mark Miller for any closing remarks.

Mark Miller: Yes. I just want to thank everybody for joining us today. It’s an exciting time to be part of the Goosehead business, and we look forward to talking to everybody again in July for our second quarter call.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

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